Sinking fund and transfer of freehold to owners
Discussion
The freeholder (also the management company) of our flats is transferring the freehold to the flat owners.
We pay a monthly service charge, which as I understand it from Section 42 of the Landlord and Tenant Act 1987 should be held in a separate account.
However I am confused by this statement; "the reserve and sinking funds should be held in a separate bank account to the service charge monies"
from this website as I had (perhaps mistakenly) thought that the service charge was the sinking fund contribution.
So my question is - when the handover of the freehold takes place, should the landlord hand over any funds?
We pay a monthly service charge, which as I understand it from Section 42 of the Landlord and Tenant Act 1987 should be held in a separate account.
However I am confused by this statement; "the reserve and sinking funds should be held in a separate bank account to the service charge monies"
from this website as I had (perhaps mistakenly) thought that the service charge was the sinking fund contribution.
So my question is - when the handover of the freehold takes place, should the landlord hand over any funds?
You would need to see the books for that. The monthly/annual service charge is totally separate from any requests for sinking funds, or capital reserves. Services charges are used for day-to-day costs. Sinking funds and/or capital reserves should be used for major repairs like a new roof, new windows etc.
TonyRPH said:
The freeholder (also the management company) of our flats is transferring the freehold to the flat owners.
We pay a monthly service charge, which as I understand it from Section 42 of the Landlord and Tenant Act 1987 should be held in a separate account.
However I am confused by this statement; "the reserve and sinking funds should be held in a separate bank account to the service charge monies"
from this website as I had (perhaps mistakenly) thought that the service charge was the sinking fund contribution.
So my question is - when the handover of the freehold takes place, should the landlord hand over any funds?
Does the ManCo produce any accounts? If so the sinking fund should be in there somewhere (as "Reserves")We pay a monthly service charge, which as I understand it from Section 42 of the Landlord and Tenant Act 1987 should be held in a separate account.
However I am confused by this statement; "the reserve and sinking funds should be held in a separate bank account to the service charge monies"
from this website as I had (perhaps mistakenly) thought that the service charge was the sinking fund contribution.
So my question is - when the handover of the freehold takes place, should the landlord hand over any funds?
ETA The Service Charge covers communal costs such as Insurance, routine repairs & maintenance, communal lighting/cleaning/gardening etc. Hopefully part of the SC goes into a sinking fund but not always. Do you not get an itemised bill for your SC?
TonyRPH said:
The freeholder (also the management company) of our flats is transferring the freehold to the flat owners.
We pay a monthly service charge, which as I understand it from Section 42 of the Landlord and Tenant Act 1987 should be held in a separate account.
However I am confused by this statement; "the reserve and sinking funds should be held in a separate bank account to the service charge monies"
from this website as I had (perhaps mistakenly) thought that the service charge was the sinking fund contribution.
So my question is - when the handover of the freehold takes place, should the landlord hand over any funds?
The sinking fund should be held separately and the lease will dictate how it can be used.We pay a monthly service charge, which as I understand it from Section 42 of the Landlord and Tenant Act 1987 should be held in a separate account.
However I am confused by this statement; "the reserve and sinking funds should be held in a separate bank account to the service charge monies"
from this website as I had (perhaps mistakenly) thought that the service charge was the sinking fund contribution.
So my question is - when the handover of the freehold takes place, should the landlord hand over any funds?
The associated monies should all transfer and remain under the control of the freeholders, but your managing agents should have two accounts as the sinking / reserve fund should be held separately from service charges. The lease will dictate the circumstances in which the sinking fund can be used.
How many flats in the block? Ours is 20 and its a PITA so we have appointed management agents.
MustangGT said:
You would need to see the books for that. The monthly/annual service charge is totally separate from any requests for sinking funds, or capital reserves. Services charges are used for day-to-day costs. Sinking funds and/or capital reserves should be used for major repairs like a new roof, new windows etc.
I don't have access to the books and it's unlikely I ever will.In previous flats I lived in, the service charge covered the day to day running expenses, and the remainder went into the sinking fund.
Countdown said:
Does the ManCo produce any accounts? If so the sinking fund should be in there somewhere (as "Reserves")
ETA The Service Charge covers communal costs such as Insurance, routine repairs & maintenance, communal lighting/cleaning/gardening etc. Hopefully part of the SC goes into a sinking fund but not always. Do you not get an itemised bill for your SC?
We don't get any statements at all. As per above, the service charge paid in the last flats we were in covered daily running costs, and the balance went into the sinking fund.ETA The Service Charge covers communal costs such as Insurance, routine repairs & maintenance, communal lighting/cleaning/gardening etc. Hopefully part of the SC goes into a sinking fund but not always. Do you not get an itemised bill for your SC?
bennno said:
The sinking fund should be held separately and the lease will dictate how it can be used.
The associated monies should all transfer and remain under the control of the freeholders, but your managing agents should have two accounts as the sinking / reserve fund should be held separately from service charges. The lease will dictate the circumstances in which the sinking fund can be used.
How many flats in the block? Ours is 20 and its a PITA so we have appointed management agents.
I'll need to have another read through the lease, as now I think about it, I don't recall any mention of a sinking fund, only service charges.The associated monies should all transfer and remain under the control of the freeholders, but your managing agents should have two accounts as the sinking / reserve fund should be held separately from service charges. The lease will dictate the circumstances in which the sinking fund can be used.
How many flats in the block? Ours is 20 and its a PITA so we have appointed management agents.
Our previous (self managed) block had 9 flats and the management was a shambolic mess (despite my attempts to fix things). Current block has 16 flats, the owners of which appear to be far more co-operative than the last place we were in.
Countdown said:
That's very helpful thanks!I had another read of the "Lease report" provided by the solicitors who carried out the conveyance of our flat.
Under the heading "Service Charge"
Under the heading "Service Charge"
report said:
In addition to paying the ground rent* you must also pay a service charge which is a contribution towards the costs expended by the Landlord in maintaining the structure of the building of which the property forms part and any communal areas of the development.
The service charge includes a contribution towards the property insurance premium as the Landlord insures the building (of which the property forms part) under a block policy.
The service charge is paid in advance...<snip>
At the end of the charging year, the Landlord [Management Company] must produce a detailed statement specifying the actual expenditure*
The service charge includes a contribution towards the property insurance premium as the Landlord insures the building (of which the property forms part) under a block policy.
The service charge is paid in advance...<snip>
At the end of the charging year, the Landlord [Management Company] must produce a detailed statement specifying the actual expenditure*
- ground rent was abolished during our purchase and the landlord informed us that it is not payable.
- we've not been here long enough to see an annual statement - I will ask one of the other owners though.
You appear to be purchasing the freehold. Not the MC. The sinking fund is one asset of the MC,
I see two options, either pay a high price that includes the cash, or pay a lower sum without the cash.
Read the transfer agreement, what is included in the sale, and decide if you are getting value for money.
I see no reason why you can't purchase just one asset of the MC, i.e the freehold
I see two options, either pay a high price that includes the cash, or pay a lower sum without the cash.
Read the transfer agreement, what is included in the sale, and decide if you are getting value for money.
I see no reason why you can't purchase just one asset of the MC, i.e the freehold
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